ABC Corporation started its business in 2019. It sells printers with a 3-year warranty. ABC corporation estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 2% will be repaired during the first year of warranty, 4% will be repaired during the second year of warranty and 6% will be repaired in the third year. In 2019 and 2020, the company was able to sell 7,500 units and 8,400 units, respectively at a selling price of P 5,000 per unit. The company also incurred actual repair costs of P 530,000 and P 1,176,000 in 2019 and 2020, respectively. What is the amount of liability for warranty reported in ABC corporation’s December 31,2020 Statement of Financial Position?
ABC Corporation started its business in 2019. It sells printers with a 3-year warranty. ABC corporation estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 2% will be repaired during the first year of warranty, 4% will be repaired during the second year of warranty and 6% will be repaired in the third year.
In 2019 and 2020, the company was able to sell 7,500 units and 8,400 units, respectively at a selling price of P 5,000 per unit. The company also incurred actual repair costs of P 530,000 and P 1,176,000 in 2019 and 2020, respectively.
What is the amount of liability for warranty reported in ABC corporation’s December 31,2020 Statement of Financial Position?
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